The 400% subsidy cliff, and what one dollar costs

Most tax thresholds taper. You cross one, and a benefit shrinks by a few cents on the dollar. The premium tax credit ceiling is not one of those. Cross it by a single dollar and the entire credit is gone — not reduced, gone — and if you took it in advance during the year, you pay all of it back.

Premium tax credit income ceiling

400% of the poverty line

A strict 'more than' test applied before Form 8962's whole-percent truncation — there is no grace band above it.

This figure has an open verification item

• GAP-033

  The 2026 Form 8962 and its instructions are unpublished. The IRS releases a tax year's Form 8962 around January of the following year, so the 2026 edition is due ~Jan 2027.

  What it means for this page: The cliff edge — the product's central number — is derived from Worksheet 2 as printed in the 2025 and 2020 editions, which agree word-for-word across the ARPA boundary. Strong, but not the 2026 document. If Worksheet 2's step order changes, the single-filer edge (currently exactly $62,600.00) and the family-of-four edge ($128,600.00) move.

  What would close it: Re-fetch after Jan 2027 and re-confirm Worksheet 2 and Line 6, plus the 2026 Table 2 applicable figures against Rev. Proc. 2025-25. Source

Why there is no grace band

The natural assumption is that a rule expressed in whole percentages must have a little slack in it: if the limit is 400%, surely 400.4% rounds down. It does not, and the reason is the order of operations on Form 8962.

Worksheet 2 asks first whether household income is more than the poverty line multiplied by 4.0. If the answer is yes, you enter 401%‡ Source: Form 8962 instructions, Worksheet 2 step 4 — the 'more than 4.0 × FPL' test is applied BEFORE the line 5 truncation; if yes, enter 401 and stop, verified 15 Aug 2026. This figure has an open verification item. on line 5 and stop. The whole-percent truncation that governs every interior boundary — 133%, 150%, 200%, 250%, 300% — is only reached in the "no" branch. So the last eligible household income is exactly four times the poverty line, to the dollar.

For a single-person household in the 48 contiguous states, the poverty figure the 2026 coverage year uses is $15,650 a year† Source: HHS Poverty Guidelines for 2025 (ASPE), not yet verified, plus $5,500 a year† Source: HHS Poverty Guidelines for 2025 (ASPE), not yet verified for each additional person. Note which year that is: marketplace eligibility for a coverage year uses the guidelines in effect when open enrolment began, which is the previous calendar year's table. Using the current year's figures moves the cliff by several hundred dollars and puts households on the wrong side of it.

What the credit is worth right up to the edge

Below the ceiling, the credit is the gap between the benchmark plan's premium and what the law says your household should be able to afford. That expected contribution rises with income across six bands.

Household income (% of poverty line)	Expected contribution
100% to 133%	2.1%
133% to 150%	3.14% rising to 4.19%
150% to 200%	4.19% rising to 6.6%
200% to 250%	6.6% rising to 8.44%
250% to 300%	8.44% rising to 9.96%
300% to 400%	9.96%

Within a band the percentage is interpolated on the whole-percent income figure, then rounded to the nearest basis point — the Form 8962 applicable-figure method.

Ruleset aca-applicable-pct-2026.draft-1·Verified 8 Aug 2026·IRC §36B(b)(3)(A) — applicable percentage

At the top of the range a household is expected to pay 9.96% of household income† Source: IRC §36B(b)(3)(A) — applicable percentage, verified 8 Aug 2026 of its income toward the benchmark plan, and the credit covers everything above that. One dollar later the expected contribution is 100% of the premium. Nothing in the table describes that step, because the step is not in the table — it is the table ending.

The part that catches people after the fact

The credit is usually taken in advance, paid straight to the insurer month by month, based on the income you estimated at enrolment. Reconciliation happens on the following year's return. Estimate low and you owe the difference.

Is repayment of excess advance credit capped?

uncapped — the full excess is repaid at every income

OBBBA § 71305 struck IRC § 36B(f)(2)(B) for tax years after 2025, so no cap exists.

Until tax year 2025 there was a repayment limitation: a household under 400% of the poverty line that had underestimated its income repaid at most a capped amount. P.L. 119-21 § 71305 struck that provision for tax years beginning after 31 December 2025. There is now no cap at any income. A household that took $9,000 of advance credit and finished the year one dollar over the ceiling repays the whole $9,000.

That change is why the cliff is worth more attention than it used to be. The edge was always there; the airbag underneath it was removed.

What can still be done about it

The credit is computed on modified adjusted gross income, and MAGI is not a number handed to you — it is the result of decisions, several of which are still open after the year has ended. A deductible traditional IRA contribution, an HSA contribution, a self-employed retirement plan contribution: each reduces MAGI directly, and near the ceiling each dollar of reduction is worth far more than its marginal tax value, because it is buying back a credit that is all-or-nothing.

The arithmetic that matters is not "how much tax does this save" but "does this land the household under four times its poverty figure". Those are different questions with different answers.

Cost-sharing reductions fall off a different ledge

The premium tax credit is not the only thing income decides. Silver-plan cost-sharing reductions — lower deductibles and out-of-pocket maximums, not lower premiums — end at 250% of the poverty line, and they are worth a great deal at the bottom of the range.

Household income (% of poverty line)	Approximate actuarial value
100% to 150%	94%
151% to 200%	87%
201% to 250%	73%

Silver plans only. Actuarial values are met within a de minimis variation.

Ruleset csr-bands.statutory·Verified 8 Aug 2026·ACA §1402 / 42 U.S.C. §18071 — cost-sharing reductions

A household between 250% and 400% has premium help and no cost-sharing help. One between 150% and 200% has both, and its silver plan behaves approximately like a platinum one. Two ledges, at different heights, and the second is the one people are usually unaware of.

Common questions

What is the income limit for the premium tax credit in 2026?

400% of the poverty line. For 2026 coverage the poverty figure is $15,650 a year for one person, plus $5,500 a year for each additional person, so a single-person household's ceiling is four times that first figure.

Is there a grace band just above 400%?

No. Form 8962 Worksheet 2 applies a strict "more than four times the poverty line" test before any rounding, and a household that fails it enters 401% on line 5 and stops. The whole-percent truncation applies to the interior boundaries only.

How much of my income am I expected to pay at the top of the range?

9.96% of household income toward the benchmark plan. The credit covers the premium above that. Above the ceiling the expected contribution is the entire premium.

If I underestimated my income, is the repayment capped?

No — advance credit repayment is uncapped — the full excess is repaid at every income. P.L. 119-21 § 71305 struck the repayment limitation of IRC § 36B(f)(2)(B) for tax years beginning after 31 December 2025, so the full excess is repaid at every income level.

Which poverty guidelines does 2026 coverage use?

The 2025 table, not the 2026 one. Eligibility for a coverage year uses the guidelines in effect when that year's open enrolment began, which are published in the previous January. Using the current year's figures moves the cliff and can put a household on the wrong side of it.